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Students by Millions Fill Labor Gap in China

BEIJING — In September, the largest factory in Yantai, a coastal city in northeastern China, called on the local government with a problem — a shortage of 19,000 workers as the deadline on a big order approached.

Yantai officials came to the rescue, ordering vocational high schools to send students to the plant, which is run by Foxconn Technology Group, a major supplier to some of the world’s electronics giants, including Apple, Dell and Amazon, among others.

As companies like Foxconn shift factories away from higher-cost production bases in China, like the Pearl River Delta region in Guangdong Province, they are discovering that workers in new locations across China are not as abundant as they had expected.

That has prompted multinationals and their suppliers to use millions of teenage students from vocational and technical schools on assembly lines. The schools teach a variety of trades and require work experience, which in practice means students must accept work assignments to graduate.

In any given year, at least eight million vocational students work on China assembly lines and in workshops, according to estimates from the Ministry of Education — about one in eight Chinese 16 to 18 years old. In 2010, the ministry ordered vocational schools to fill any shortages in the work force.

Foxconn, the trading name of Hon Hai Precision Industry, is based in Taiwan and is a major supplier of smartphones, computers and videogame equipment to electronics companies around the world. It employs 1.2 million workers across China. Nearly 3 percent are student interns.

The company “has a huge appetite for workers,” Wang Weihui, vice director of the Yantai Fushan Polytechnic School, told a reporter recently.

“It tightens the labor market,” said Mr. Wang, whose school sends its students to work at Foxconn and other companies.

Local governments eager to please new investors lean on schools to meet shortfalls in the number of workers. That is what Yantai, in Shandong Province, did in September when Foxconn had trouble filling Christmas orders for Nintendo’s Wii game consoles.

“It has been easier to recruit workers in the Pearl River Delta than some inland locations,” Foxconn said in a written statement in late December.

Some companies cite rising wages in southern China for the shift to other regions. Wages are a growing component of overall manufacturing costs in China, totaling as much as 30 percent of production costs, depending on the industry, according to the Boston Consulting Group.

Wages began to rise around 2006 as the migration of rural workers to Guangdong ebbed. China’s one-child policy, plus a jump in higher education enrollment, further depleted the number of new entrants to the work force, pushing wages up further.

That prompted U.S. carmakers, Korean electronics manufacturers and private Chinese firms to look for new manufacturing bases. Cheaper electricity, land and tax incentives, as well as a growing consumer class in regions beyond the booming coastal southern provinces were other reasons to relocate.

Minimum wages in Yantai can be as low as 1,100 renminbi, or $180, a month, compared with 1,500 renminbi in Shenzhen, the city neighboring Hong Kong.

What makes vocational students attractive is that they can be paid less than full-time workers, although some companies — including Foxconn — pay the same base wages.

Still, even if they pay the same base salary to both full-time staff members and interns, employers can save 10 percent to 40 percent per person because legally they do not have to pay health insurance or social security benefits for student interns.

Yantai was not the only local government to help Foxconn.

Two months earlier, Foxconn’s 100,000-worker factory near the city of Zhengzhou, in Henan Province, was racing to meet a deadline for the Apple iPhone 5.

The Henan authorities told cities to find 30,000 more workers for Foxconn, according to a Zhengzhou city government notice reprinted by Students and Scholars Against Corporate Misbehavior, a labor rights group based in Hong Kong.

The example of Yantai shows how much China’s labor market has changed in recent years.

Zhang Weifang, head of human resources at the Yantai factory of LG Innotek, estimates the number of employable people 16 to 18 years old in the city has halved since her company began production in 2004. LG Innotek is the components unit of LG Electronics of South Korea. “It’s really hard to find people nowadays,” she said.

About 2,400 young people work in Ms. Zhang’s factory.

Of them, one-third are vocational students or workers contracted through other agencies.

Students are sought after by plants that need extra workers during peak production periods, and this demand has risen since China’s labor laws were overhauled in 2008 to make firing full-time staff members more cumbersome.

And students are plentiful. The number of graduates of vocational schools has surged 26 percent in the past five years, to 6.6 million students in 2011. Parents whose children cannot compete in exam-driven Chinese high schools look to vocational schools.

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Vocational students made up such a large percentage of the work force at a Honda plant in southern China that when they went on strike for better pay in 2010, they crippled Honda’s production chain in the country. A Honda spokeswoman said the ratio of students to regular employees had since significantly declined, but she would not give a figure.

About 2.7 percent of Foxconn’s work force in China consists of vocational students, the company said in October. That works out to about 32,400 teenagers.

“This program gives Foxconn an opportunity to identify participants who have the potential to be excellent full-time employees, should they wish to join our company upon graduation,” Foxconn said in a statement at the time.

That month, the Chinese state media said 56 people younger than the legal working age were among students sent to work at Foxconn in Yantai. Foxconn removed the underage students from the plant after the reports.

Chinese law limits students to eight hours of work a day, with no night shifts. Vocational students in Yantai said they had worked as many as 12 hours a day and routinely had done night shifts at both Chinese-owned factories and plants with foreign investors.

Foxconn has a program with Apple, one of its main customers, to pay interns the same wages as other workers, limit their work to eight hours a day, five days a week and allow them to quit if they want to.

More than a dozen students interviewed in Yantai had a mixed view of their internships, ranging from relatively positive to outraged. Many said the experience had taught them to look for something other than assembly line work after graduation.

Most three-year vocational programs require a two-month internship in the second year, while the third is spent entirely at work. Even though students know they need factory experience to graduate, the assembly line comes as a shock to some.

“At the beginning I was really excited. I thought I could get experience and help out my family with some money,” said a 17-year-old woman named Yu who was an intern in Yantai. A high school student, she was afraid publication of her full name could bring repercussions from her school or factory.

“Electronics is our major and so this will help in finding jobs,” said Sun Chuangjiao, a former Foxconn intern.

Companies defend the internships as educational.

“The vast majority of our interns and the schools that sponsor them find their experience with us relevant and meaningful and an important first step in their career development,” a representative from Emerson Electronics said.

At its air-conditioner compressor plant in the Yangtze Delta city of Suzhou, Emerson employs 40 interns for eight-month stints, out of a work force of 1,063. All are older than 18, it said.

The shortage of labor means companies often search far and wide for vocational schools to supply workers.

Ms. Zhang of LG Innotek said she had contacted schools across China to find interns. Mok Jangkyun, an auditor with Samsung Electronics, said he had driven a full day after flying to Guizhou Province in southwest China to vet a vocational school sending interns to supplier factories.

Samsung did an audit of factories after activists found underage workers with fake identification at one of the electronics giant’s 250 supplier factories in China. The South Korean company said it had not found underage workers at any of its suppliers.

Supplying vocational students can also be lucrative.

Some students in Yantai said their school had taken 500 renminbi out of their monthly wages. Their school declined an interview request.

Some companies pay teachers directly to keep students in line in dormitories and on the factory floor, Students and Scholars Against Corporate Misbehavior has found. In other cases, companies pay management fees or set up extra facilities at schools.

Foxconn says that while it pays teachers who supervise students, it usually does not compensate schools.

“However, in some cases, we do provide compensation to meet their overall administrative costs,” it said.